- Value stocks are stocks that appear to be undervalued or simply may be trading at a discount to their real worth or intrinsic value. They are not cheap stocks! They just tend to trade at a low price relative to their fundamentals. Therefore stocks that have a relatively high dividend yield; low price to sales ratio; or low price to earnings ratio may fall into this category.
- You see, most investors and analysts like to think of value stocks as bargains. It is believed that, the market has undervalued the stock for a variety of reasons and the investor hopes to get in before the market corrects the price. The low valuations that value stocks enjoy are often as a result of some type of bad news. For example poor earnings results, bad press reports, legal issues, etc.
- The most important thing to know about a value stock is that they are for some reason, trading under what their true value or potential really is. If you are an investor, and are considering this type of stock at this moment, my advice to you is that, you must have a longer time horizon, because if that stock has been undervalued or ignored for a while, it may take a bit of time before that stock gets noticed and makes a move.
- These are the beauties of the stock world. They’re exciting, have good stories and can help create a lot of wealth. A stock is referred to as a growth stock, when it has the ability to give its holders a higher return than other stocks with similar characteristics. The stocks are usually able to achieve this superior return because; at some point, they were wrongly valued by investors.
It is important to understand that, growth stocks might not necessarily be stocks in a growth company. It will surprise you to know that, they are normally seen in neglected stocks. My advice to you is that; don’t stick your neck into growth investing without exercising some caution or better seeking advice from the experts.
How do you raise money for your business?
- You could borrow from a bank or other entities. Hey, but pause and think about this, first of all, no one will lend you money without a guarantee that he or she will get it back. Bank loans are associated with high interest that may eventually erode your profits, leaving you with less or no money to run your business. Another option is to attract people who are willing and able to invest money in your business. What will they get? You will award their trust in the viability of your business by a piece of the company.
- They will become owners of it. As a result this will give them voice on the company's issues. A term to describe this is Private Placement.A third option is to look for firms and individuals that are specialized in investing in other businesses, which is commonly referred to as venture capital.